Question

Portions of the financial statements for Peach Computer are provided below.

PEACH COMPUTER Income Statement For the year ended December 31, 2018
Net sales		$2,025,000
Expenses:
Cost of goods sold	$1,140,000
Operating expenses	650,000
Depreciation expense	59,000
Income tax expense	49,000
Total expenses		1,898,000
Net income		$ 127,000

PEACH COMPUTER Selected Balance Sheet Data December 31
	2018	2017	Increase (I) or Decrease (D)
Cash	$111,000	$89,500	$21,500	(I)
Accounts receivable	45,900	53,500	7,600	(D)
Inventory	84,000	59,500	24,500	(I)
Prepaid rent	3,900	6,800	2,900	(D)
Accounts payable	54,000	41,500	12,500	(I)
Income tax payable	5,900	14,500	8,600	(D)

Required:

Prepare the operating activities section of the statement of cash flows for Peach Computer using the DIRECTmethod. (List cash outflows as negative amounts.)

Answer 1

Cash received from customers = Net sales + Decrease in accounts receivable
Cash received from customers = $2,025,000 + $7,600
Cash received from customers = $2,032,600

Cash paid to suppliers = Cost of goods sold + Increase in inventory - Increase in accounts payable
Cash paid to suppliers = $1,140,000 + $24,500 - $12,500
Cash paid to suppliers = $1,152,000

Cash paid for income taxes = Income tax expense + Decrease in income tax payable
Cash paid for income taxes = $49,000 + $8,600
Cash paid for income taxes = $57,600

Cash paid for operating expenses = Operating expenses - Decrease in prepaid rent
Cash paid for operating expenses = $650,000 - $2,900
Cash paid for operating expenses = $647,100